December 19, 2018

New Year, New E-Commerce Laws in China

In yesterday's post we looked at an installation exploring the possibilities of VR technology for what regards the development of design projects.

Let's continue today the thread about future trends by looking at technologies, and in particular at what may change in the new year in terms of rules and regulations regarding a more specific field, such as e-commerce. While in some countries e-commerce represents an emerging industry, in others, including China, it is a booming and fluid market in continuous transformation.

The new year will actually bring in some changes for what regards e-commerce in China. After passing through four drafts over the past few years, in August the Standing Committee of the National People's Congress (NPC) of the People's Republic of China (PRC or China) passed the PRC Electronic Commerce Law. The latter will take effect on Jan. 1, 2019.

The law is aimed at improving the e-commerce market, protecting "legal rights and interests of all parties" and maintaining "the market order".

According to the new law, all e-commerce operators (all of them will have to be registered with the State Administration for Industry and Commerce as market entities and be subject to taxes), including e-commerce platform operators (that is legal persons or unincorporated organizations providing a space for digital business, transaction matching, information release, and other services to facilitate parties in an e-commerce transaction, such as the shopping site Taobao owned by Alibaba), merchants on e-commerce platforms (that is third party merchants that sell goods or services on e-commerce platforms like vendors with an online store on Taobao) and online vendors operating via their own websites or via other web services and social media applications (like WeChat and short video app Douyin), will have to fulfill specific obligations to protect consumers' rights and interests.

Operators will have to take into account cyberspace security, privacy and personal data protection (Article 18 and 23 focus on users' profiling and protection of personal data), online advertisement, standard form of contract, e-signature and intellectual property rights (IPR).

Stronger compliance rules are the key element of the new law: the priority for the new regulations is indeed emphasising the responsibility of the platform operators and guaranteeing the protection of the consumers for what regards their privacy, options and rights to know.

Besides, Article 22 and Article 35 of the new legislation focus on fair competition obligations for all e-commerce operators: operators with dominant positions will not be able to abuse their position to exclude or restrict competition and will not be able to impose unreasonable restrictions, conditions, or fees on merchants. Operators that do not comply with the new regulations will face a penalty of 500,000 yuan (73,260 U.S. dollars), or up to 2 million yuan in serious cases.

Consumers will have stronger legal protection including protection against fake reviews (both positive and negative and written by paid agents), and there will be penalties for operators deleting genuine reviews and writing fake ones, failing to disclose paid-for posts and fabricating false transaction information.

The biggest changes maybe regard the fake market: e-commerce platforms will be responsible for the sale of fake goods on their site (in the past individual merchants were responsible when caught selling counterfeits). Violations will be met with penalties also in this case.

Another key change will regard sustainability as the State Council and local governments at or above county-level will have to support and promote environmentally friendly packaging, storage, and transportation in e-commerce, while delivery service providers will have to use eco-packaging.

The new regulations mean that there will be some transformations for what regards micro-shops and micro-business mainly using WeChat and other social media as the large platforms have already implemented some of the requirements of the new law. More improvements may be introduced, while other aspects regarding the law will have to be clarified, but in general the new regulations aim at promoting cross-border e-commerce (that hit 90.24 billion yuan last year, but at the same time received the most complaints by consumers).